DIVINE LUND LLM

Faculty of Law
Lund University
Master of European Affairs programme,
Law
Master thesis
By
Ane Divine Jinor
Title
EC AND NATIONAL COMPETITION LAW FOR
UNDERTAKINGS;
COMPARATIVE SUBSTANTIVE LAW AND
JURISDICTIONAL ISSUES
(CASE STUDY UK COMPETITION LAW)
Supervisor
Henrik Norinder
Semester
Spring 2003

Contents
1 INTRODUCTION 5
2 THE ECONOMICS OF COMPETITION LAW 9
2.1 The Ideal Competition Scenario 9
2.2 Effective Competition 10
2.2.1 The Cournot Model of oligopoly 10
2.2.2 Bertrand Model of Oligopoly 10
2.3 Anti-competitive behaviour 11
2.3.1 Cartel Behaviour 11
2.3.2 Abuse of market power 11
2.3.3 Mergers 11
2.3.4 Establishing the Existence of Market Power 12
3 OBJECTIVES OF EUROPEAN AND NATIONAL
COMPETITION POLICIES 13
3.1 Basis EC Competition policy 13
3.1.1 The Basis of EC Competition Law between Undertakings 14
3.1.1.1 The integration perspective 14
3.1.1.2 The Economic Goal 14
3.1.2 Other policy considerations 15
3.2 The Scope of EC Competition Law 15
3.3 Scope of U.K. Competition Law 19
3.3.1 Competition Act 19
3.3.2 Enterprise Act 22
3.4 Harmonisation Puzzle between Community and Domestic Competition Laws25
4 MECHANISM FOR THE IMPLEMENTATION OF COMMUNITY
COMPETITION LAW 29
4.1 Background 29
4.2 Procedure under Regulation 17 29
4.3 Procedure under the future regime 31
5 ENFORCEMENT OF U.K. COMPETITION LAW 34
5.1 Enforcement Authorities 34
5.1.1 The Office of Fair Trading 34
5.1.2 Secretary of State 35
5.2 Enforcement Mechanism 36
5.2.1 Notification 36
5.2.2 Investigation and enforcement of the Prohibitions 36
6 PREVALENCE OF COMMUNITY LAW OVER NATIONAL LAW39
6.1 Introduction 39
6.2 Principle of Supremacy 39
6.3 Principle of Direct Effect of Community Law 40
6.4 Practical implication of both concepts 40
7 CO-OPERATION BETWEEN COMMUNITY AND NATIONAL
COMPETITION AUTHORITIES 43

7.1 Co-operation under the present regime 43
7.2 Co-operation under the future regime 44
8 IMPACT OF EC COMPETITION LAW ON NATIONAL
COMPETITION LAW 46
8.1 Introduction 46
8.2 Chapter 1 Prohibition and article 81 EC Treaty 46
8.2.1 Notification of possible overlapping Chapter 1 and article 81 prohibitions 47
8.3 UK Chapter 2 prohibition and article 82 EC 49
9 JURISDICTIONAL ISSUES ON EC AND U.K. MERGER
CONTROL 53
9.1 EC Merger Control 53
9.2 UK Jurisdiction on the control of Mergers and Concentrations (Schedule 1 and
Section 3(2) Competition Act) 53
9.2.1 UK jurisdiction on merger control under FTA 1973 54
10 CONCLUSION 57

1
Summary
The main issue in this thesis has been to analyse EC and National
Competition Law for undertakings with respect to comparative substantive
law and questions on jurisdiction. The choice of National Competition Law
for a case study is that of the United Kingdom.
Part one of this thesis dealt with comparative substantive law on
Competition between undertakings under the UK and the EC Competition
Laws. Analysis presented in this paper indicate that three main issues on the
law on competition between undertakings are covered in both jurisdictions;
anti-competitive agreements and other concerted practices, abuse of
dominant position and the control of mergers and concentrations.
Analysis also suggest here that though competition laws at both levels may
have been to ensure the economic goal of competitively of the respective
markets, national and community jurisdictions do not always have the same
objectives for their competition policies. These disparity in policy goals
accounts for the differences that can be found in the application of similar
prohibitions on anti-competitive agreements and abuse on dominant position
under national law and under EC law. Thus for example the UK
Competition Law introduces such concepts as exclusions and special
treatment of agreements; Concepts unknown to EC Competition Law.
Though analysis in this paper have indicated a trend at the level of domestic
Competition Laws towards adopting provisions on the prohibitions similar
to those in articles 81 and 82 of the EC Treaty there is no indication that
harmonisation of domestic competition laws at a community level is likely.
This is also because of the differences in policy considerations between the
Member States on the one hand and the Community on the other.
This paper covers the analysis of the control of article 81 and 82 of the EC
Treaty under the present Regulation 17 as well as analysis on the changes to
be brought about by a new Regulation that will in future repeal the use of
regulation 17. This new Regulation will introduce a more decentralised
regime and will allow national courts to fully apply articles 81 and 82 of the
EC Treaty in co-operation with the Commission. This new Regulation also
wipes out the notification procedure, which existed under Regulation 17.
The analyses in this paper have indicated that Criminalisation of anti-
competitive activities with regard to cartels is a radical difference between
EC and UK Competition Laws. The rationale for this is to serve as a
deterrent to physical persons not to get involved in such activities. I f the EC
is to take such an approach this author has indicated in this thesis that it will
require radical reforms at the level of the EC as well as the Member States.

2
Under part II of this thesis the mechanism for the resolution of conflicts on
jurisdiction at both levels have been analysed. With respect to the
prohibitions this has been done under the present regime under Regulation
17 as well as under the future Regulation 1/20023.
In this part of the thesis principles such as those on supremacy and direct
effect of Community law over national law have been used to elucidate the
prevalence of Community Law over National law. Here specific examples
on this supremacy at the level of competition have been presented in terms
of case law, UK legislation and under the present and future Community
regime on Competition have been analysed.
This thesis has illustrated that there is the possibility of overlap between EC
and National Competition Law and has attempted to present the appropriate
mechanism to follow under such circumstances both under the present
regime and the future regime.
The co-operation mechanism for the application of similar prohibitions at
both levels under the present regime, which allows for notification has been
presented. However the new Regulation while repealing the notification
procedure also empowers the National Courts and Competition Authorities
to fully apply articles 81 and 82 of the EC Treaty. This author suggests that
in future it will be advisable for undertakings who hitherto could notify
agreements to the Commission and who would no longer be able to do so,
can benefit from this decentralised approach to make such notifications to
competent national Courts providing for notification procedures. In the case
of notification made to the UK competition Authorities, it will require them
to follow the procedure requiring consultation with the Commission under
this new Regulation rather than that contained in the Competition Act. This
according to this author may require that the UK Competition Act be
modified to accommodate the changes that will be brought about by this
new Regulation.
Though Community dimension on merger control is determined by the
Merger Regulation, merger Control between both jurisdictions according
to this thesis is rather peculiar in nature as compared to the other
prohibitions. Under the EC merger control the scope of Community
jurisdiction is narrowed down by exemptions based on legitimate interests
of member states. Here the tendency to have similar provisions to EC
merger control seems not to be the case. Rather it may seem that the reverse
situation is the case. For example the existing UK law on merger control
dates back to 1973, whereas that of the EC dates back to 1989 and has gone
through regular amendments up to that of 1997 and will likely go through
further amendments in the future. Therefore national merger control seems
to be more stable than Community merger control.
In conclusion this author believes that, despite some similarities between EC
and National Competition laws, the disparities in substantive law and

3
jurisdictional issues between both Competition Laws will continue to subsist
in the near future. Appropriate mechanisms through case law and legislation
have been put in place to ensure the smooth co-habitation of both
jurisdictions. This not withstanding, it will be difficult to envisage a lasting
solution to the problems raised by the need for co-habitation at both levels.
The reason for this is that new economic and policy realities will always
necessitate regular reform in this domain. The enlargement of the European
Union may become one example of change in circumstance that might
necessitate radical changes in Community as well as national rules on
Competition. It is also worthwhile to note that the scope of EC competition
seems to be gradually eroding National Competition Laws because of its
wide interpretation.

4
Abbreviations
CFI; Court of First Instance
EC; European Community
ECJ; European Court of Justice
FTA; Fair Trading Act
OFT; Office of Fair Trading
SFO; Serious Fraud Office
U.K; United Kingdom
U.S; United States of America

5
1 Introduction
The paramount reason why I choose this topic is because there is no such
thing as Competition Law in my Country of Nationality in particular and
most parts of Africa in general. Regional integration however exists in
Africa but it is not as structured as that within the European Community.
After going through this Master’s Programme I can now honestly say that I
have the believe that national and Regional Competition Law, as well as
increased integration between regional integration units in Africa, can help
to stimulate economic growth and development therein. My intention in the
near future therefore is to carry out further Research work on the adaptation
of EC and its Member States National Competition Laws, for African
countries. For this reason I realised that an in-depth research on substantive
law and jurisdictional issues between EC and National Competition Laws
for undertakings will be inspirational.
The reason for choosing using UK Competition Law as the case study for
National Competition Law is because I am of a Common Law background
and I believe that UK Competition Law will be more convenient for me.
This thesis is going to be based on a comparative analysis between
substantive European Community Competition Law and Member States
Local Competition Laws on the one hand, and jurisdictional issues between
these distinct jurisdictions on the other hand.
The problem oriented and precise purpose of this work will be to attempt to
present in the most explicit form possible, situations where either or both
EC and UK Competition Laws will be applicable to the activity of an
undertaking or group of undertakings within the EC. Such activity being that
which is incidental to Community and/or National Competition Law. An
attempt will also be made to present solutions to jurisdictional issues in
either or both situations. Because of the possibility of overlapping
Competition rules between both jurisdictions, the mechanism used to avoid
conflicts of jurisdiction and double sanctions on undertakings will also have
to be analysed.
The fact that Competition issues fall within the ambit of Community
Competence when economic activities incidental to the subject affect trade
between member states This criteria is in itself not very explicit and will be
another important issue to be covered by this thesis. The reason for this is
because there is no clear-cut delimitation on what constitutes acts that affect
trade between Member States. This ambiguous criteria determining
Community competence remains susceptible to wide interpretations, which
could at times be problematic. Therefore an attempt will be made in this
work to clarify what this concept is all about. This will be done in
comparison to Competition issues, which have a national dimension only.

6
The analysis in this paper will make use of Community as well as national
legislation, case law and relevant literature, on the subject. It will take into
account the present regime of Community Competition Law as well as
reforms that have been put in place for a future decentralised regime. It will
cover three main aspects on competition between undertakings: Anti-
competitive agreements and other similar practices, abuse of dominant
position and mergers.
Apart from this first chapter on the introduction, the body of this paper will
be divided into two major parts.
Part I will deal with a background on substantive Community and National
Competition Laws, while part II will deal with the resolution of conflicts on
jurisdiction in Competition issues.
Part I will be divided into four chapters.
Chapter two will deal with a background on the economic analysis, which
elucidate the necessity of Competition Law.
Chapter three will deal with the objectives of EC and National Competition
policies. In this chapter a background on the scope of both EC and UK
Competition Laws will be presented respectively. Also included in this
chapter will be a puzzle concerning the necessity or not of a Community
harmonisation of National Competition Laws.
Chapter four will deal with the mechanism for the implementation of
Community Competition Law and will include emphasis on the procedure
under the present regime as well as that under the future regime.
In chapter five the Enforcement of UK Competition Law will be covered.
This will include a presentation of the competent competition authorities
within the UK and the procedure for the enforcement of UK Competition
Law.
Under Part II of this thesis the mechanism for the resolution of conflicts on
jurisdiction that will be presented with respect to:
i) the application of national law on Competition which may be
incidental to Community Competition Law on the one hand, and
ii) the application of exclusively Community Law on Competition by
the UK Courts and Competition Authorities on the other hand.
iii) The special approach on jurisdictional issues between EC and UK
merger control will also be analysed

7
With respect to the first two situations cited above analysis will be based on
a dual approach; first it will be based on the present regime and then later on
the future Regime.
Chapter six deals with the concept on the prevalence of Community Law
over national Law. This will be done using the principles of supremacy and
direct effects. Application of these principles in case law in the field of
Competition Law as well as their acknowledgement through subsequent
Community and National Legislation in the same field will also be
presented herein. The practical implication of both principles will also be
analysed in this chapter.
Chapter seven will deal with the Mechanism for co-operation between
Community and National Competition Authorities and Courts.
Chapter eight on its part will deal with the Impact of EC Competition Law
on National Competition Law. The analysis here will deal with similar EC
and UK, rules on anti-competitive agreements and similar practices, as well
as those on the abuse of dominant position.
Chapter nine will be an attempt to clarify the demarcation between
Community and national jurisdiction on merger control as well as the
mechanism to avoid conflicting decisions.
The last chapter will be based on the conclusion of this thesis. At this level
there will be an attempt to present the status quo on the main issue under
investigation in this thesis and commentaries thereto. Commentaries will
cover the expectations on the future regime on competition as well as the
necessity for legislative reform.
In order to delimit the scope of this thesis, National Competition Law will
generally be with respect to that applicable in the UK. However it will still
be necessary to have Community case law relating to other National
Competition Laws to elucidate Community case law on certain issues, or
explanations based on other Domestic Competition Laws to elucidate other
issues on Competition.
The use of the word ‘National’ throughout this thesis could either mean the
UK or EC Member States depending on the context.
This work will be limited to Competition Law for undertakings and will
have no bearing with sectoral policies of the Community, nor state measures
that affect competition.
The legal method for Research that will be used to approach and solve the
problems will be based on the analysis of relevant, case law as well as
Community and National legislation. This Research will be Library based
and will also make use of relevant material from credible web-sites on the
Internet.

8
PART I
BACKGROUND ON COMPETITION LAW

9
2 The Economics of
Competition Law
2.1 The Ideal Competition Scenario
The model of perfect competition is effect an ideal situation. In practice it is
impossible to for it to be achieved. However it is a good starting point for a
better understanding of the concept of competition.
Within such an ideal model, it is assumed that the following situations ought
to exist:
i) Many buyers and sellers of a homogenous product;
ii) The quantity of product bought or sold by the buyer respectively is very
small;
ii) There, should be perfect transparency and it should be easy for all
market players to have relevant information on the product and
iv) There should also be free entry and exit out of the market.
The implication of this is that the marginal cost of the product1
of each
market player will get to an equilibrium state with the market price of the
product as market player increases his output.2
At this equilibrium state, no firm makes any financial profits or losses. If
any firm makes excess profits, new entrants will be encouraged to get in and
earn some of the excess profits. This will be the case until such a time that
those profits could no longer be made. The free exit assumption in this case
will imply that those who are making losses will leave the market.3
In a
perfect competition, no firm makes profits above the normal level of profit.
Monopoly is the opposite extreme of perfect competition. Here, instead of
many small sellers, there is just one seller who will be able to price above
the level that will exist in the case of a perfect competition.
These explanations give the detrimental aspects of both the perfect
competition and monopoly models. Added to this, the monopoly model does
not take account of the activities of the competitors because they are either
too small, as is the case in the perfect competition model, or monopolise the
1
Cost of producing extra unit of product
2
Bishop and Walker at 17
3
ibid at 17-18

10
market as in the monopoly model. In practice however, firms do need to
take into account the commercial decisions of their rivals when formulating
their own commercial strategy because such decisions may affect the
decisions of other players in the market. For this reason a third model on
competition referred to as Effective competition, will have to come into
play.
2.2 Effective Competition
Effective competition is only possible when interactions between competing
firms are taken into consideration. In this respect, more realistic models of
competition referred to, as models of oligopolistic behaviour ought to be
examined.4
2.2.1 The Cournot Model of oligopoly
This model5
in a nutshell assumes that each firm competes by setting their
own output once so as to maximise their output, given the output of the
others firms. The outcome in this case is a non co-operative Nash
Equilibrium6
. The Nash non-co-operative equilibrium is described as an
equilibrium, which occurs when given the behaviour of all other competitors
in the market, no firm wishes to change its behaviour. Each firm maximises
its profit, taking as given the behaviour of all other firms. The Cournot
equilibrium in the case of more than two firms presupposes that as the
number of firms increase, the market price decreases, however price is
always higher than marginal cost as the number of firms increase probably
because firms set prices and quantities.
This model would have sounded more real if it is interpreted as firms first
choosing capacity and then setting prices subject to the capacity constraint.
2.2.2 Bertrand Model of Oligopoly
The assumption behind this model is a situation where for example there are
just two firms in an industry, who compete by setting their prices once so as
to maximise their profit for a homogeneous product and have the same
marginal cost. The outcome is non-co-operative Nash equilibrium.7
The
practical aspect here is that each firm tends to maximise profit by lowering
the prices set by the other, until one firm sets the price at the marginal cost
where after it will not be profitable to reduce such a price. The result is that
4
See Bishop and Walker at 22
5
ibid at 24
6
ibid at 22
7
ibid

11
both firms set price at marginal cost and there is allocative efficiency. This
situation holds true no matter the number of firms involved in the market.
The problem with the simple Bertrand model is that it neglects the economic
reality that more firms will make the market more competitive, especially
where there are a number of small players. The assumption that products are
homogenous is also not very true, because usually they are differentiated in
one way or the other. Each differentiated product is subject to monopolistic
competition and if one firm undercuts the other, the higher priced firm will
still have customers even at higher prices. In such a situation, each firm sells
above marginal cost and each firm makes zero profits because of the
assumption that positive profits will lead to new entry, thus driving prices
back to towards zero.8
2.3 Anti-competitive behaviour
The fact that as per the Cournot and the Bertrand models prices could go
above marginal cost, is not necessarily inconsistent with firms vigorously
competing with each other. This does not however also mean that all
outcomes in an oligopolistic market are as a result of effective competition.
This could as well be as the result of cartel behaviour or the abuse of a
significant market power or even due to the creation of a dominant position.
2.3.1 Cartel Behaviour
Assuming that cartels are effective, they are anti-competitive. Because
competitors collude on prices, such competitors will be selling fewer units
of the product than in a situation of competition and at higher prices and
therefore making higher profits.9
2.3.2 Abuse of market power
This could be defined as the ability of a firm or group of firms to raise price
through the restriction of output above the level that will prevail under
competitive conditions and thereby to enjoy increased profits from the
action.10
If such a firm or group of firms abuse this potential, the result will
be adverse effects on normal competition.
2.3.3 Mergers
Mergers on the other hand, which are akin to the idea of fusion of, control
between hitherto competitors follow a different reasoning to that on the
8
ibid at 26
9
ibid at 26-27
10
ibid at 27

12
abuse of market power. Here the assessment is whether the merger will
create or increase market power and so allow prices to rise relative to the
prevailing price level.
2.3.4 Establishing the Existence of Market Power
Because it is difficult to assess whether or not a market is subject to
competition especially with respect to establishing what the appropriate
competitive price is, indicators on competition in the industry are used to
establish whether there is competition or not. Some of these indicators
include:
i) Industry concentration,
ii) The number of firms and
iii) Barriers to entry.

13
3 Objectives of European and
National Competition Policies
3.1 Basis EC Competition policy
The most logical deduction from economic analysis of competition is that it
will lead to the maximisation of consumer welfare by achieving the most
efficient allocation of resources and by reducing the cost as far as possible.
In reality however, many different policies have been pursued in the name
of competition law, many of which are not rooted in notions of consumer
welfare in the technical sense at all. In some cases even, some of them may
be plainly contrary to the pursuit of the objectives in the technical sense.11
The result of all these is therefore inconsistency and contradiction. For this
reason, a legal mechanism becomes necessary to regulate such
inconsistencies within a particular jurisdiction.
As shall be indicated later in this Work, though most European Community
(EC) Member States have adopted national competition laws similar in
wordings to that of the EC, this does not ipso facto imply that their
objectives are exactly the same. In general, Competition Law serves the
following purposes:
i) Protection of the Consumer against monopolists or anti-competitive
agreements between independent firms,12
ii) It enables the dispersal of power and the redistribution of wealth i.e., the
promotion of economic equity rather than economic efficiency.13
iii) Competition Law should also protect the smaller firms against the more
powerful rivals.14
iv) Competition Law may also be used as an instrument for the other
policies as unemployment, to dampen price inflation, to control mergers as
well as to control in-equality between bargaining power of contracting
parties.15
11
Wish at 12-13
12
See pages 13-21 of the 1989 Annual Report of the DGFT on the protection of consumers
best interests, cited in Wish , footnote 16 at 13
13
See Wish at 13
14
ibid at 13. Note that it is indicated there that the approach in the U.S. is departing from
the very sentimental approach to the small competitors, in contrast to the European
Commission which treats the small and medium sized undertakings more seriously.
15
Ibid at 14

14
3.1.1 The Basis of EC Competition Law between
Undertakings
EC Competition Law has broadly speaking two goals:
- The promotion of integration between Member States and
- the promotion of effective and undistorted competition within the
Community.
3.1.1.1 The integration perspective
The integration motivation of EC Competition Law plays an important role
in the decisions of the EC Commission as well as those of the European
Court of Justice, who show great hostility towards agreements or business
practices which prevent or hinder cross-border trade.16
3.1.1.2 The Economic Goal
The Economic goal of the EC Competition Law as already indicated above,
is to maintain effective competition. The fact that in an oligopolistic model
of competition, prices may go far above marginal cost, is not necessarily
inconsistent with firms vigorously competing with each other. Nevertheless,
all outcomes in an oligopolistic market are not as result of effective
competition. This could as well be as a result of cartel behaviour, or as a
result of abuse of market power, as indicated in chapter 1. Therefore, the
pre-occupation of the EC Competition rules is to sanction such outcomes or
to prevent agreements leading to the creation of economic entities that may
have the potential of restricting competition. For these reason, the direct or
indirect, actual or potential infringement of EC Competition rules, are
sanctioned by the Commission the Court of First Instance (CFI), as well as
the European Court of Justice (ECJ).17
Under article 81 of the EC Treaty,18
the Commission and the EC Courts will
not limit their consideration to whether existing competition will be
restricted by an agreement. They will also take into account the possibility
that the parties to an agreement might in the future become competitors in
the particular market. Article 81(3) however spells out the exceptions to the
rule under article 81(1) for situations which may lead to economic and
technical progress, be beneficial to the consumers. Article 81(2) provides
for the automatic nullity of such agreements, which fall under article 81(1).
16
See Case 23/67 Brasserie de Haechte S.A v Wilkin.Janssen, [1967] ECR 407
17
See Case 56/65 Societe Technique Miniere v Maschinenbau Ulm GmbH [1966] ECR 235
18
Treaty establishing the European Community (Official Journal C 325 of 24 December
2002)

15
Under article 82 of the EC Treaty, an in-exhaustive list of instances of abuse
of dominant position within the Common Market or a substantial part of it is
cited. Neither this article nor article 81 explicitly prohibit the creation or the
re-enforcement of a dominant position. This has been taken care of by the
Merger Regulation.19
3.1.2 Other policy considerations
Apart from the objective of economic integration and efficiency within the
Community, there are also other economic tasks with a common policy in
the field of Agriculture and Transport, the promotion of research and
development and the strengthening of competitiveness among EC industries.
Therefore, conflicts with the different aims may occur.20
However, article 2
and 3 of the EC Treaty sets the limits of the exceptions that can be based on
article 81(3). To go beyond this limit will involve the risk that a weakening
of competition will result in a conflict with the objectives of the Common
Market.21
Economic objectives other than the protection of competition can be found
under the conditions for exemption in article 81(3) of the EC Treaty. But
this does not apply to all fields that an economist will consider being
“economic”, as for example the level of employment or the distribution of
income. Under EC Competition policy this goals have the same status as
non-economic objectives; for example, culture or the environment, which
are also included in the general objectives of the Treaty and must somehow
be integrated in the application and practice of Community Law.22
However
as Van Gerven et al23
concluded in 1997, such other aims were never
considered sufficiently important to out-weigh serious restraints of
competition such as cartels.
3.2 The Scope of EC Competition Law
Article 2 of the EC Treaty includes Competition policy as part of the
objectives of the Treaty. Article 3(1)(g) also establishes that that the
activities of the Community include:
“The institution of a system ensuring that competition in the Common
Market is not distorted”
19
Council Regulation 4064/89/EEC of December 21 1989 on the control of concentrations
between undertakings; OJ L 180, 09/07/1997 P. 0001-0006
20
Drahos at 54
21
ibid
22
ibid at 54
23
cited ibid

16
Article 4 of the same Treaty on its part states that the economic policy of the
Community must be conducted:
“in accordance with the principle of a free market economy with free
competition”
In order to reach its objectives, the EC Competition rules must address four
different situations:24
i) Agreements between two or more parties whose collusion prevents
access to markets or products, to the detriment of third parties or
consumers and eventually leads to price increases;
ii) Companies capitalising from dominant positions to the detriment of
competitors and customers;
iii) Effects of structural changes, which affect market conditions
(mergers and acquisitions); and
iv) State measures, which affect market conditions.25
Article 81 of the EC nullifies agreements between undertakings, which
affect competition within the Community with some exceptions. Article 82
on the other hand prohibits the abuse of a dominant position which may also
affect trade within the Community, but has no exemptions similar to those
afforded to article 81(1) prohibitions under article 81(3). Articles 86-89 are
directed towards some form of State intervention, which may affect
competitive conditions.
Article 83 of the EC empowers the Community to have secondary
legislation in the field of Competition. Regulation 1726
is the must potent
instrument empowering the European Commission to regulate Competition
issues between undertakings. Under this regulation, exemptions from
prohibitions can be applied for and granted by the Commission.
A new Community Regulation,27
which shall replace Regulation 17 with a
more decentralised approach, shall come into force by May 2004.28
Elements on the creation of, or the strengthening of a dominant position
within the Community through merger acquisitions or Joint ventures have
also been regulated by the Merger Regulation.29
24
Lidgard at 14
25
It should be noted that Competition rules on state measures distorting competition is out
of the scope of this work.
26
Council Regulation 17/62/EEC of February 6 1962, First Regulation implementing
articles 85(now 81) and 86(now 82) of the Treaty, OJ 1962 13/204
27
Regulation (EC) 1/2003 OF 16 December 2002 on the implementation of the rules on
competition laid down in articles 81 and 82 of the Treaty, Official Journal L 001,
04/01/2003 p. 0001-0025
28
This new Regulation shall be analysed more detaily in subsequent sections of this work

17
In order for there to be a breach of Community competition rule, the breach
must have a Community dimension i.e., it must have effects on trade
between the Member States of the Community. In STM MBU30
the Court
held that the Trade criterion requires a prohibition if there is the possibility
that trade between Member States might be impeded. Direct or indirect,
actual or potential breaches to Community competition rules are also
sanctioned in a like manner.31
However The fifth revision of the
Commission’s de minimis Notice32
accepts horizontal collaboration up to
10% market share and vertical collaboration up to 15% market share on
condition that the agreement does not contain certain blacklisted clauses
such as price fixing, production restriction and market sharing stipulations.
Nevertheless as per this notice, small and medium sized undertakings, which
are defined as those which have fewer than 250 employees and have either
an annual turnover not exceeding EUR 40 million or an annual balance
sheet not exceeding EUR 27 million, are entirely outside the operation of
article 81 EC Treaty.
The Merger Regulation also applies to concentrations with a “Community
dimension as provided for in the Regulation:
“For the purposes of this Regulation, a concentration has a Community
dimension where;33
(a) the aggregate world-wide turnover of all the undertakings concerned is
more than ECU 5 000 million, and
(b) the aggregate Community-wide turnover of each of at least two of the
undertakings concerned is more than ECU 250 million, unless each of the
undertakings concerned achieves more than two-thirds of its aggregate
Community-wide turnover within one and the same Member State.”
Article 3 as amended provides that:
“For the purposes of this Regulation, a concentration that does not meet
the thresholds laid down in paragraph 2 has a Community dimension
where:
(a) the combined aggregate worldwide turnover of all the undertakings
concerned is more than ECU 2 500 million;
(b) in each of at least three Member States, the combined aggregate
turnover of all the undertakings concerned is more than ECU 100 million;
(c) in each of at least three Member States included for the purpose of
point (b), the aggregate turnover of each of at least two of the undertakings
concerned is more than ECU 25 million; and
29
Supra note 19
30
Case 56/65, La Societe Technique Miniere v Maschinenbau Ulm GMBH 1966 ECR 235
31
ibid.
32
Commission Notice on agreements of minor importance which do not appreciably restrict
competition under article 81(1) of the Treaty Establishing the European Community (de
minimis); OJ 2001/C368/07 (First version JO 1970 C84/4)
33
Article 4

18
(d) the aggregate Community-wide turnover of each of at least two of the
undertakings concerned is more than ECU 100 million;
unless each of the undertakings concerned achieves more than two-thirds
of its aggregate Community-wide turnover within one and the same
Member State
As per this regulation, such concentrations with a community dimension, must be notified to
the Commission.”
This crucial word “concentration” to which article 1(1) of the Merger
Regulation applies is defined in article 3(1) of the same Regulation as:
(a) the merger of two firms into a single enterprise and
(b) The acquisition of direct or indirect control over one firm by another.
The word “concentration” which includes both concepts of Mergers and
acquisitions has been elaborated further in Commission Notice on the
concept of concentration.34
According to this Notice, a Merger occurs when
companies amalgamate into a new undertaking and both cease to exist as
separate legal entities. A merger also exists when one entity is absorbed into
another. An acquisition on the other hand is focusing on changes in control
achieved by one or more undertakings over a formerly independent
company. Also the creation of a joint venture performing on a lasting basis
all the functions of an economic entity which does not give rise to the co-
ordination of competitive behaviour of the parties amongst themselves or
between them and the joint venture shall, shall constitute a concentration
within the meaning of paragraph 1(b) of article 3(2) of the Merger
Regulation.
Hitherto concentrative joint ventures fell under procedural rules of Merger
Control and had to be notified according to the Merger rules,35
while co-
operative joint ventures continued to be subject to article 81 of the EC
Treaty. This situation was unsatisfactory not only because this distinction is
not only very complicated for firms, but also because the legal treatment of
both is different. While Merger control is subject to time limits and decision
applies for all times, decisions under article 81(3) can drag forever and
exemptions are of a limited validity. In the 1998 Merger Regulation 4064
/89 this position was changed. Now all 36
full function joint ventures fall
under Merger Control and must be notified according to the Merger Rules.
34
Commission Notice of 2 March 1998 on the concept of concentration under Council
Regulation 4064/89/EEC , OJ 1998C 66% [1998] 4 CMLR 586
35
With regard to the the procedure for the notification of Mergers, see Commission
Regulation 2367/90/EEC OF 25 July 1990 on the control of concentrations between
undertakings (as ammended by Commission Regulation 3666/93/EEC, of 15 December
1993) OJ 1989 L 219/5, [1990] 4 cmlr 683
36
See Drahos at 81

19
The territorial applicability of EC Competition Law is also very important.
In Wood-Pulp 137
the ECJ held that the territorial applicability of EC
Competition Law, is when any anti-competitive activity, has effects within
the territory of the European Union.
3.3 Scope of U.K. Competition Law
The Competition Act of 9th November 1998 is the principal instrument
regulating competition within the U.K.The Enterprise Act 2003, is also
another major instrument, which deals with the criminalisation of anti-
competitive activities.
3.3.1 Competition Act
Under this Act, restrictive agreements and arrangements are subject to a new
national prohibition, which are similar in wording to article 81 of the EC
Treaty, and are referred to as the Chapter 1 prohibition. This Act repeals the
1976 Restrictive Trade Practices Act as well as the Resale Prices Act 1976.
The chapter 2 prohibition of this Act deals with the abuse of a dominant
position. The monopoly provisions of the Fair Trading Act will remain in
force allowing for the investigation and the remedying of ‘monopolistic
practices’. The competition provisions in the 1980 Competition Act will
however be repealed.
Also national merger control in the U.K. remains unaffected by the new Act
and continues to be governed by the merger provisions of the Fair Trading
Act (FTA) 1973. The only difference brought about by the new Act is that
the functions of the Monopolies and Mergers Commission are wholly
transferred to the new competition Commission that replaces it. Powers of
investigation decision –making and enforcement will rest with the Office of
Fair Trade (OFT). Appeals against OFT decisions will go to a new body
called the Competition Commission.
The Competition Act 1998 was drafted with similar provisions to those of
article 81 and 82 of the EC Treaty in order to avoid a double regulatory
burden as a result of the existence of two unaligned sets of Competition
rules. This however does not mean that the provisions of the EC Treaty and
the Competition Act are applied in a similar manner. In fact the policy goals
are different. While the EC Competition Law rules seek to improve on
integration within the Community the U.K. competition Law seeks to make
the UK market more competitive.
37
Joined cases 89/85, 104/85, 114/85, 116/85, 117/85, 125-129/85, Wood-pulp Producers v
EC Commission, [1988] ECR 5193

20
Because of the possibility of overlap between EC and U.K. Competition
Laws, there is the possibility of conflict arising as to the jurisdiction as well
as the applicable law on the conflict pertaining to the Competition issue in
question.
The divergent policy goals also means that there is the possibility of
exemptions or exclusions from the U.K. Chapter 1 prohibition of vertical
agreements and land agreements, even though such agreements fall within
the ambit of equivalent EC prohibition under article 81 of the EC Treaty.
The Competition Act 1998 makes a radical departure from EC Competition
Law by introducing two new concepts:
i) ‘exclusions’, and
ii) ‘separate treatment’
Special protection treatment is given to certain agreements under these
concepts, which will otherwise have fallen under the Chapter 1
prohibition.38
I t is important to distinguish this concepts from “exemption”.
- An excluded agreement is one, which is deemed not to come within the
Chapter 1 Prohibition at all.
- An agreement granted special treatment is one which benefits from an
order made under section 50 of the Competition Act protecting it from
Chapter 1 prohibition, whether by exclusion or exemption or otherwise.
- An agreement granted exemption is one, which falls within Chapter 1
prohibition, but which has offsetting economic benefits that justify non-
application of the Prohibition.39
Under section 3 of the Competition Act, read together with Schedule 1 to 4,
the main types of agreements, which are, excluded from the Chapter 1
Prohibition, are:
i) Mergers and Concentrations (including concentrative joint
ventures)40
;
ii) Services of general economic interest, of the type covered by Article
86(2) of the EC Treaty41
;
38
There are also exclusions from the chapter 2 prohibition, and special treatment apply to
agreements under the same prohibition.
39
See Drahos at 102 for these distinctions
40
Schedule 1 and section 3(2)
41
Schedule 3 paragraph 4

21
iii) Agreements which received “section 21(1) clearance” under the
Restrictive Trade Practices Act42
;
iv) Compliance with planning obligations and other legal requirements43
;
iv) Agreements relating to coal and steel would be covered by the ECSC
Treaty ( European Coal and Steel Community (ECSC) Treaty
1951)44
;
v) Rules of non UK financial markets which are regulated under the
European Economic Area (EEA)45
;
vi) Certain agricultural products agreements46
;
vii) Agreements which are subject to similar Competition Scrutiny under
other UK Legislation47
; and
viii) Other general exclusions to be created by the Secretary of State.48
Special treatment provisions fall under Section 50 of the Act and cover
vertical agreements and land agreements which will otherwise fall within
Chapter 1 prohibition but are protected from this prohibition by virtue of the
Special treatment. Section 50 does not itself grant special treatment, but
merely empowers the Secretary of State to do so by way of a subsequent
order.49
The territorial applicability of this Act with respect to the Chapter 150
prohibition is when the prohibited practice, affects trade within the U.K. The
Chapter 2 prohibition also has territorial applicability when there is the
abuse of a dominant position within the U.K. or any part of it51
.
The criminalisation of anti-competitive acts is also an element dealt with by
the U.K. Competition system, unlike that of the EC. Article 42-44 of the
Competition Act provides for offences in relation to the refusal to produce
documents during investigations carried out by OFT, as well as for the
obstruction of justice by preventing OFT officials from entering into
premises in order to carry out investigations. Anti–competitive acts
criminalised by this Act also include offences such as misleading
42
Schedule 3 paragraphs 1 and 5
43
ibid
44
45
46
47
Schedule 2
48
See Schedules 3(3) and 4, 3 paragraph 7, 3 paragraph 6 and schedule 4
49
See Drahos at 104
50
Section 2(1)(a-b)
51
Section 18(3)

22
information given to investigating authorities as well as the destruction of
documents, which could have been useful for investigation.
3.3.2 Enterprise Act
The criminalisation of anti-competitive behaviour in the UK has been
enhanced recently by the enacting of the Enterprise Act, which introduces
new offences referred to as corporate offences. According to the official UK
government DTI web-site52
the initial Bill has finally been voted into law as
the Enterprise Act and received royal assent on 7 November 2002 and the
competition and consumer provisions will come into force in spring/summer
2003.
This Act, which is intended to reinforce deterrence to anti-competition
behaviour53
, criminalizes participation in certain forms of cartel activities
within the U.K. domestic market. It also criminalizes some activities
referred to as corporate offences. Misleading information given to
authorities investigating such activities as well as refusal to corporate with
or obstructing the investigation process on such activities according to this
Act are also to be criminalized.
Section 120 of this Act deals with corporate offences while sections 183-
185 deal with cartel offences.54
Section 114(2) provides for offences related
to misleading information given intentionally to authorities investigating
breach on competition issues or to another person knowing that the same
will be given to such authorities.
Persons guilty of offences under both sub-sections 1 and 2 of section 114
shall be liable accordingly either on summary conviction to a fine not
exceeding the statutory minimum, or on conviction on indictment, to a term
of imprisonment not exceeding two years or to a fine or to both.
Corporate offences are considered as offences that are committed by persons
corporate, with connivance consent or due to negligence on the part of a
director, manager, secretary or other officer of a body corporate or person
purporting to act in such capacity.55
In both cases the person and the body
corporate commit the offence and shall be liable to be proceeded against and
punished accordingly.56
The same situation applies to a body corporate
managed by its members. Such members shall be liable in a similar manner
52
http//www.oft.gov.uk/intro.htm
53
See the publication of the Office of Fair Trading on ”Competeition Reform” ; Regulatory
impact assessment, found at http://www.dti.gov.uk/enterpriseact/pdfs/ria-competition.pdf
54
Full text of the Act available in
http://www.publications.parlierment.uk/parliermentuk/pa/1d200102/bills/112/2002112a.pd
f
55
Section 120(1)(a-b)
56
ibid section 120 (3)(1)(1)

23
in the event of them being involved in corporate competition breach
offences.57
Cartel offences provided for under section183-86 of this Act are agreements
between at least two undertakings to be implemented on price fixing,
prevention of supply or production of products, division of the supply of
products or services to customers within the UK. It also includes division of
the customers within the UK for supply of products or service, or bid
rigging arrangements. Under section 185, these offences under section 183
are punishable on conviction on indictment, to imprisonment for a term not
exceeding six months or a fine not exceeding the statutory maximum or
both. Proceedings under section 183 may be instituted only by the director
of the Serious Fraud Office (SFO), or by or with the consent of the Office of
Fair Trade (OFT).
A further factor indicating the importance attached by the Enterprise Act to
Cartel offences is the fact that offences under section 183 and conspiracy or
attempts to commit such offences, are now included among offences under
Section 2 of the Extradition Act of 1870. 58
The Extradition Act deals with
arrangements with foreign states on extradition issues.
Section 187 deals with investigation of offences under section 183 while
section 188 deals with the powers given to the authorities when conducting
cartel offences. Section 189 deals with the power to enter premises under
warrant. Non-collaboration with investigating authorities under the
circumstances under sections 188 and 189 are punishable under section 196.
This section also punishes destruction of valid documents under
investigation under section 183.This punishment is for two years on
conviction on indictment or to a fine or both, or on summary conviction to a
fine not exceeding the statutory maximum.
In an effort to ensure that “whistle blowers” are not discouraged by criminal
sanctions, the OFT will have the power to issue “no action letters”
confirming to informants that they will not be prosecuted provided that they
collaborate fully with investigators.59
3.3.2.1 Comments on the UK approach on anti-trust criminalisation
In terms of the way this Act is to criminalise hard-core cartels, it can be said
that it is certainly a draconian measure and indicates the vigour with which
the U.K. intends to sanction anti-trust activities within its jurisdiction.
This U.K. approach towards anti-trust criminalisation raises legal issues on:
i) Those who are to be punished;
ii) The nature of the punishment;
57
ibid section 120(3)(1)(2)
58
ibid section 186
59
See web-site supra note 38

24
ii) The element of intention in the participation in cartel offences;
iv) The nature of the cartel offences; and
v) The territorial applicability of the Act.
The fact that this Act provides for criminal sanctions to executive personnel
of any undertaking, which participates in cartel offences of his employer,
raises the possibility of conflict of interest for such an official. This conflict
will be between serving his employer and protecting himself from criminal
liability. Nevertheless this situation could better serve the purpose of the
criminalisation of anti-trust activities as compared to sanctions based solely
on fines under the civil regime. Under the civil regime, an undertaking could
anticipate the huge profits that could emanate from implementing an anti-
competitive activity. This could be compared to the highest possible fines in
the event of the discovery of such cartel activity. After such analysis it can
then take the risk of implementing it. On the other hand according to the
context under this Act, such an employee could be deterred from being
involved in such a malpractice for fear of criminal liability. This not
withstanding, it might also be possible that his employers might coerce him
to implement or conceive anti- competitive ideas. In such a situation the
employee could be himself bent on taking the risk to preserve his lucrative
job.
The nature of the punishment; which could either be on summary conviction
on fines or on conviction on indictment either to fines and/or terms of
imprisonment raises a problem on the discretionary powers of the judges or
the jury. This problem is with respect to the mitigating circumstances, which
will make it possible for the offender to have any punishment other than the
maximum.
The element of intention to participate in such anti-trust activities can be
implied from the wordings of section 120 of this Act. This section which
contains the words “connivance” and “consent” on the part of an employee
of an undertaking, is in line with the mens rea requirement necessary for
liability in other criminal offences. If such mens rea to participate in a cartel
offence is established, it will certainly have a positive impact on the
members of the jury. On the other hand, with the use of words akin to
negligence under the same section 120, it may seem that it imposes some
kind of strict criminal liability on the part of an employee who is linked to a
cartel activity carried out by his employer. This might seem to be the case
even if he might not have intended such anti-competitive results.
The provisions of this Act seem to have established as primary requirement
for liability in cartel offences, agreements or concerted practices that may
yield anti-competitive effects within the U.K. Such agreements or concerted
practices need not to be necessarily executed. In such a situation, the culprits

25
will be punished in like manner as if such measures had been implemented
(successfully or not).
The territorial applicability of this Act follows the reasoning by the
European Court of Justice in Wood Pulp 160
. U.K. courts have jurisdiction
on cartel offences in so far as they produce effects within the U.K.
The ‘no action letters’ issued to secondary offenders in cartel activities is a
welcome step towards facilitating investigations on allegations of cartel
activities within the U.K. and is in line with similar leniency measures for
accomplices who collaborate fully with investigators in other criminal
investigations.
3.4 Harmonisation Puzzle between Community
and Domestic Competition Laws
As of now within the Community, there is no express legislation in the form
of a Regulation or Directives intended to harmonise competition Law within
the Member States . Competition legislation within the Member States
solely emanates from local legislation. Community harmonisation has not
yet taken place even though Competition policy is one of the paramount
objectives of the Community as well as for the Member States. What is it
that makes the Community legislator and the Member States indifferent to
such a harmonisation, despite the fact that there is always the possibility of
overlap and therefore conflict and differences between Community and
Member States jurisdiction on one hand and Community and Member States
Substantive law on the other?
Though there has not been such express harmonisation, recently there has
however been the tendency for the reform of local competition laws within
the Community to forms similar in wording to articles 81 and 82 of the EC
Treaty. In other cases, interpretation of national competition law could be
based on either or both EC substantive and/or case law on competition. This
has not taken place as a result of any Community recommendation but as a
result of the implied recognition of the need to have local competition laws
similarly worded to those of the Community. The reason for this tendency,
is to avoid double jeopardy on the part of local undertakings who otherwise
will be faced with totally different worded text on Competition, all of which
will be applicable to them.
The following examples will illustrate the relationship of local Competition
law with respect to Community Law
The German Cartel Law (Gestz Gegen Wettbewerbs Beshränkungen
(GWB)) refers to Community Competition Law as regards only one aspect;
60
Joined cases 89/65, 104/85, 114/85, 116/85, 117/85,125-129/85 of 27 September 1988
Wood-pulp Producers v EC Commission

26
the decentralised application of Competition rules and the power to grant
individual exemptions. Though this is contrary to Council Regulation 17/62,
this legal basis was created in the GWB at time when the Commission was
planning to give up monopoly61
and the German legislator wanted to be
prepared for this possible development.62
The BkartA has also regularly
applied EC Competition rules in the past, especially where it did not have
the necessary instruments under German Law. This has been the case for
example with reference to restrictive vertical distribution agreements and
sector exemptions.63
Under Austrian cartel law, the supremacy of European Law, is explicitly
acknowledged. Furthermore several provisions in this law state that an
exemption will not apply if an agreement in question violates EC Law. This
means that under Austrian Law there is a national legal duty to take article
81 of the EC Treaty into consideration in purely national proceedings.64
Under Austrian Law interpretation of specific terms is often adopted from
EC and German legal systems even though the legal consequences under EC
and German Law are not similar to those under Austrian Cartel Law.65
The Dutch Competition Law on its part provides for exceptionally close
links with EC Competition Law. It refers to European Competition Law in
three ways:
- first it provides for direct and indirect links, terms , rules and case law,
- secondly it has incorporated EC group exemptions and
- thirdly it provides for the decentralised application of article 81(1) and 82
of the EC Treaty to be carried out by the Dutch Competition Authority.66
Despite this tendency of national competition laws converging towards that
of the EC; especially under the last two examples on Austria and the
Netherlands, one would have thought that the Community Legislator and
Member States would have been interested in the harmonisation of national
competition laws to avoid disparities. However this has not been the case,
for either or both of the following reasons;
- because the Community legislator is not interested in national legislation
on Competition which does not affect trade between Member States,
61
This reform has already been implemented under Regulation 1/2003 which shall come
into force by May 2003
62
See Drahos at 107
63
ibid at 107
64
ibid at 108. This Austrian approach has been impliedly acknowledged under article 2 of
the new Regulatiob 1/2003
65
ibid at 108. In a like manner to the Autrian approach , the approach under Dutch Law has
also been impliedly accepted by Regulation 1/2003
66
Mortelmans, cited in Drahos at 109

27
- or because national Competition Laws have different national policy goals
to that of EC competition.
However in the light of the fact that the “effects on trade “ test provides
jurisdictional basis for allocating responsibility between the European
Commission and National Competition authorities it does not; at least in
relation to complaints and investigations initiated by national authorities
provide a practical basis for allocation of jurisdiction.67
For this reason is
difficult to understand why harmonisation of national competition rules will
not have a good case. Therefore as between Community Competition Law
and National Competition Laws, it may seem that there will always be an
overlap with respect to jurisdiction as well substantive Law. This overlap
also gives room for the possibility to have cases which would have been
scrutinised under national Competition Law but would not, because they
affected trade between Member States, but are not scrutinised by
Community authorities because they do not give rise to a significant
Community interest.
This fear however seems to have been laid to rest by the Regulation 01/2003
giving full powers to national authorities to apply articles 81 and 82 of the
EC Treaty, in close collaboration with the European Commission. This new
regulation seems also to be the furthest the Community Legislator has gone
in harmonising the application of EC Law by national authorities. This
however does not mean the harmonisation of national Competition laws in
the real sense of the word.
Furthermore the status quo on this puzzle related to the harmonisation of
national Competition Laws within the Community remains virtually
unchanged. This is indicative of the fact that the disparity between national
competition policy and objectives prevails over the concern about the
harmonisation of national competition rules within the Community. Thus
for example, while the EC Competition rules grant exemptions for article
81(1), for agreements that contribute to promoting technical or economic
progress, which are beneficial the consumers, the German Cartel Law
instead makes a conscious choice not to grant an exemption for the same
reasons. This is because the German instrument was meant not to serve
industrial policy goals.68
Similarly, the Austrian Cartel Law does not refer
to the protection of competition but rather to general economic objectives
such as price stability and employment, though increasing competition
oriented goals are playing an increasing role.69
The Austrian competition
policy on environment and health can also be subsumed as objectives
granting economic justification for the implementation of Austrian
Competition Law.
67
See Coleman and Grenfell at 28
68
See Drahos at 111
69
ibid at 112

28
This few examples70
on the disparity between EC and national competition
objectives considered so far makes the case against the harmonisation of
national Competition Laws within the Community tenable.
70
These examples besides that of the UK, were used to indicate a trend within the
Community. The UK, approach will be dealt with in more detail, in subsequent sections of
this work.

29
4 Mechanism for the
implementation of Community
Competition Law
4.1 Background
Regulation 17 contains the most important provisions relating to the
application of articles 81 and 82 of the Treaty, which is still in force at
present. The application of this Regulation on Competition will however
cease to exist by May 1 2004, when the new Regulation71
on the
implementation of rules laid down in articles 81 and 82 of the Treaty, shall
come into force. By virtue of article 43(1) of this new Regulation, article
8(3) of Regulation 17 shall continue to apply to decisions pursuant to article
81(3) of the Treaty, which were taken prior to the date of application of this
Regulation, until the date of expiration of those decisions. Other Regulations
related to Competition rules for undertakings have either been repealed or
amended by this new Regulation and shall be so indicated in this new
Regulation where appropriate.
Therefore, the Mechanism for the enforcement of Community Competition
rules for undertakings shall be discussed with reference to the existing as
well as the future regime.
4.2 Procedure under Regulation 17
Under the existing regime Exemptions to anti-competitive agreements
falling under article 81(1) can be claimed under article 81(3) for the period
after they have been notified to the Commission on the prescribed form.72
As concerns agreements that satisfy the conditions of the various block
exemptions Regulations prior notification is not necessary. These block
exemptions applied through article 81(3) of the EC Treaty, entitles the
Commission to lay down exemption Regulations to agreements falling
under article 81(1) on the basis of powers conferred by the Council. These
Regulations represent a significant relief of the Commission’s
administrative burden, at the same time offering considerable legal certainty
to undertakings.73
71
Council Regulation 1/2003
72
Article 24 Regulation 17 and new form A/B Regulation 3385/94, OJ 1994 L377/28
73
See Case T-51/89 Tetra Pak Rausing SA v Commission [1990] ECR 11-309 at 362, cited
in Kapteyn and Themaat at 867

30
The legal basis of notification can be summarised as follows74
:
- Agreements otherwise contrary to article 85(1) (now 81(1)) of the EC
Treaty which have not been notified are prohibited by law and are
void.75
- The notification of an agreement identical to a standard agreement ipso
facto makes the identical agreement to have the same legal effects to that of
the standard agreement.76
- Only notified agreements are eligible for an exemption under article 85(3)
(now 81(3)) of the EC Treaty.77
- Notified agreements for which exemptions have not been granted under
article 85(3) (now 81(3)), enjoy immunity from fines, unless the
Commission has lifted that immunity by means of the so called article 15(6)
of Regulation 17 letter.78
Negative Clearance can also be issued by the Commission after the
notification of an agreement or practice by an undertaking or group of
undertakings as the case may be. This negative clearance indicates that on
the basis of the information it has received, it has no grounds to intervene
under article 81(1) or 82 of the EC Treaty, with respect to an agreement,
decision or practice.79
This implies that no exemption is needed.
Individual exemptions are also sometimes granted to an undertaking or
group of undertakings, after the notification of an agreement or practice
capable of violating article 81(1) or 82 of the EC Treaty. The granting of
such individual exemptions, fall under the exclusive competence granted to
the Commission by virtue of Regulation 17. This power is to grant
exemptions, based on article 81(3) of the EC Treaty.80
Exemption decisions
are granted for a specific period of time, frequently for 10 years, and may be
subject to conditions and obligations.81
By virtue of article 3 of Regulation 17, the Commission may adopt a
decision requiring undertakings to cease and desist from infringements of
article 81 and 82 which it finds proven. Such decisions may or may not
include the imposition of fines.82
Before the Commission takes any decision as provided for in articles
2,3,6,7,8,15 and 16 of Regulation 17, the Commission shall give the
undertakings or association of undertakings concerned, the opportunity of
74
ibid at 863-864
75
Case 13/61 De Geus v. Bosch [1962] ECR 45
76
Case 56/65
77
Regulation 17 article 4(1)
78
See Case 10/69 Portelange [1969] ECR 309
79
Regulation 17 article 2
80
ibid article 9(1)
81
ibid article 8
82
See article 15 of Regulation 17

31
being heard on the matters to which the Commission has taken objection.83
In such circumstances, other natural or legal persons could also be heard.84
Decisions of the Commission in application of article 81(3) of the EC
Treaty, requires it to invite all interested third parties to submit their
observations.85
Article 9 of Regulation 17 read jointly with article 230 of the EC Treaty,
will indicate that review of the Commission’s decisions on Competition
issues, are carried out by the European Court of Justice. National Courts by
virtue of the fact that articles 81(1) and 82 of the EC T Treaty have direct
effect, may themselves decide that agreements are prohibited and thus void,
without it being necessary for the Commission to have first adopted a
decision or initiated proceedings.86
This shared jurisdiction runs the risk of
the national Courts and the Commission, taking conflicting decisions.87
4.3 Procedure under the future regime
The major innovation brought about by the future regulation on the
implementation of article 81 and 82 of the EC Treaty, is the decentralisation
of the centralised regime that exists under the present Regulation17. The
need to meet up with the changes of an integrated and future enlargement of
the Community as well as the need to ensure effective supervision, on the
one hand, and to simplify administration to the greatest extent, on the othe,
also constitute some of the other major objectives of this new Regulation.88
This new Regulation is in contrast to the notification system which exists
under Regulation 17, through which a negative clearance, individual
exemption or a prohibition could be granted by the Commission after the
notification of an agreement or practice which could violate articles 81 or 82
of the EC Treaty. This new Regulation does not require any notification to,
nor a decision from, the Commission in similar circumstances, to declare
infringements of article 81(1), prohibited or not, satisfying or not satisfying
the conditions under article 81(3) as the case may be.89
Similarly, any abuse
of a dominant position referred to under article 82 of the EC Treaty shall
also be prohibited without any prior decision being required.90
The provisions of these new regime cited so far imply that the undertakings
will no longer benefit from the advantages they had during the notification
procedure Such advantages include the immunity from fines after
83
ibid article 19(1)
84
ibid article 19(2)
85
ibid article 19(3)
86
See Kapteyn and Themaat at 870
87
The mechanism to resolve jurisdictional issues, will be dealt with in part 2 of this work
88
See recitals 1, 2, and 3 of Regulation 1/2003
89
See ibid articles 1 and 2
90
ibid article 3

32
notification, while awaiting the decision from the Commission under the
present regime.
From all indications, under the new regime that will be in place with the
coming into force of this new Regulations, there will be a burden of due
diligence on undertakings to know whether their intended actions will
infringe articles article 81(1) or 82, or shall fall under the exemption under
article 81(3), of the EC Treaty, lest they face the negative consequences.
Article 7(1) of this new Regulation, clearly excludes the word “application”
or any other word similar thereto, when referring to an application for an
exemption under Regulation 17 article 3. Instead, this article only deals with
the commencement of Commission’s investigations which could either be
on its own initiative or from a complaint from a natural or legal person
having a legitimate interest or from a Member State.91
The element of burden of proof in this new Regulation is also an innovation
meant to ensure legal certainty. The person or authority alleging
infringement of article 81(1) or 82 of the EC Treaty, has the burden to prove
such infringement, while an undertaking or undertakings that claim the
benefit of the exemption under article 81(3) shall bear the burden of proving
that it meets such requirements.92
For a long time, the case law of the ECJ had allowed for the application of
articles 81(1) and 82 of the Treaty, by the Courts of the Member States
because of their direct applicability. This new Regulation has not only
taken into consideration this case law, but it has also included the
application of article 81(3) of the EC Treaty, by the national Courts of the
Member States.93
Also included in this new Regulation as an innovation are interim measures
for which the powers of its implementation have been given to the
Commission.94
This new Regulation also provides for close co-operation between the
Competition Authorities of the Member States95
and the Commission as
well as between the Commission and the ECJ with the Courts of the
Member States96
, on the implementation of articles 81 and 82 of the EC
Treaty.
Extensive powers of investigation on possible infringements of articles
81(1) and 82 of the EC Treaty have been given to the Commission by this
new Regulation. Such powers include:
91
See alsp article 7(2) of Regulation 1/2003
92
ibid article 2
93
ibid articles 5 and 6
94
ibid article 8
95
ibid article 11
96
ibid article 15

33
- The Commission’s power of inspection of undertakings and association of
undertakings with respect to the implementation of this Regulation;97
- The power to enter the premises of undertakings in order to examine books
and other records related to business, and ask for explanations from
authorities of such undertakings or group of undertakings on the subject
matter;98
- The Commission even has powers to carry out its investigations in places
other than the premises of the undertakings or association of undertakings.99
The procedure used in carrying out such inspections is also provided for by
this Regulation. Such aspects as the powers of investigation also include
powers to national Member State Competition Authorities, to assist national
authorities of other Member States to investigate infringements of articles
81(1) and 82 of the EC Treaty, that have taken place in their territory. This
is supposed to be carried out according to the national law of the assisting
Member State.100
97
ibid article 20
98
ibid
99
ibid article 21
100
ibid article 22

34
5 Enforcement of U.K.
Competition Law
5.1 Enforcement Authorities
According to the Competition Act, the principal competition authorities are
the Office of Fair Trading (OFT), the Competition Commission, and the
Secretary of State.
5.1.1 The Office of Fair Trading
The Office of Fair Trading, is headed by the Director General of Fair
Trading (the Director). The OFT is responsible for the day to day operation
of the regime under the Competition Act. This day to day activities include:
- Conducting investigations,
- Giving guidance on the application of the Act,
- Deciding whether the prohibition has been infringed,
- Granting exemptions from prohibitions and
- Taking enforcement measures including fines. 101
5.1.2 Competition Commission
The Competition Commission is created by the Competition Act and is
given two main functions:
i) First appeals on decisions made by the Director can be made to it.102
This appeals could include:
- Appeals from persons against whose conduct the Director has taken a
decision;103
- An appeal against a decision stating that a chapter 1 or chapter 2
prohibition has been infringed, or regarding the grant of an individual
101
102
Competition Act 1998 section 46
103
ibid section 46(1)

35
exemption or on the conditions imposed with respect to the exemptions104
and
- Appeals on the cancelling of the exemption or the withdrawal or varying
of decisions following third party appeals.105
ii) This Act also gives the possibility for third parties with sufficient interest
in relevant decisions taken by the Director, to make appeals to the
Competition Commission.106
Decisions made by the Competition Commission can be appealed further to
the appropriate Court by a party or a person having sufficient interests in the
decision in question.107
Such appeals could be based on:
- a point of law arising from the decision of an appeal Tribunal, or
- any decision of an appeal Tribunal as to the amount which is to be paid as
penalty.108
The Competition Commission also takes over the duties previously carried
out by the Monopolies and Mergers Commission under the 1973 Fair
Trading Act.109
5.1.2 Secretary of State
The role of the Secretary of State under the Act is that of a rule making
nature, which includes:
- Extending, restricting or removing exclusions from the Chapter 1 and
Chapter 2 prohibitions,
- making Block Exemption orders following recommendations from the
OFT, and
- Approving guidance given by OFT in relation to appropriate levels of
penalties.
104
ibid section 46(3)
105
ibid section 46(3)
106
ibid section 46
107
ibid section 49(2)
108
ibid section 49(1)
109
ibid section 45

36
5.2 Enforcement Mechanism
The enforcement mechanism for the Competition Act comprises of two
main stages which are: the Notification procedure, and the investigation and
enforcement of the prohibitions.
5.2.1 Notification
According to the Act, a person who thinks that his conduct may infringe the
Chapter 1 Prohibition110
or the Chapter 2 Prohibition111
should make an
application to the Director, notifying such conduct. On notification, the
Director may give the applicant guidance as to whether or not his conduct is
likely to infringe any of the above prohibitions. The Director may as well
take a decision as to whether any of these prohibitions has been infringed
and if not whether it is so as a result of exclusion.
The Director can not take further action with respect to a conduct for which
he had previously given guidance or decision that that conduct does or does
not infringe any of both prohibitions except in any of the following
situations:
i) Where the Director has reasonable grounds to believe that there has
been a material change of circumstances since he gave his guidance;
or
ii) he has reasonable suspicion that the information on which he based
his guidance was inaccurate; or
iii) there is a complaint about the conduct.112
5.2.2 Investigation and enforcement of the Prohibitions
OFT has the following roles in relation to the investigation and enforcement
of the prohibitions:
i) If it has reasonable suspicion that the chapter 1 or Chapter 2
prohibition has been infringed, it will conduct an investigation.113
ii) During the investigation, it will require the production of specified
documents114
and can enter and search premises.115
110
ibid section 12
111
ibid section 23
112
See ibid sections 14 and 15 of Chapter 1 prohibitions and sections 24 and 24 with
respect to Chapter 2 prohibitions
113
ibid section 25
114
ibid section 26
115
ibid section 27-28

37
iii) OFT makes decisions on the alleged infringements based on its
investigations and gives directives to the relevant persons to bring
the infringement to an end.116
iv) It makes applications to the Court for an appropriate order, when it
has given a direction for a person to bring an infringement to an end
and the person to whom it is made fails to comply without any
reasonable excuse.117
v) In specified circumstances, the Director may take interim measures
prior to the completion of an investigation in order to prevent serious
and irreparable damage.118
vi) OFT on making a decision that there was an infringement may also
require the payment of a penalty119
and also take action for the
recovery of the penalty120
.
vii) OFT has to prepare and publish guidance on the appropriate amount for
the penalties with the approval of the Secretary of State.121
viii) OFT can withdraw the immunity from penalties that otherwise applies
to small agreements and conduct of minor significance.122
116
ibid section 32-33
117
ibid section 34
118
ibid section 35
119
ibid section 36
120
ibid section 38
121
ibid section 38
122
ibid section 39-40

38
PART II
RESOLUTION OF CONFLICTS ON JURISDICTION

39
6 Prevalence of Community
Law over National Law
6.1 Introduction
At one time, it was thought that the EEC (as the EC was formerly known)
was based on a Public International Law Agreement that was binding only
between signatory Member States. As such it could not create rights and
obligations with respect to natural and legal persons which could be
enforced by the national Courts. However through the principle of the
Supremacy of Community Law over national Law and the direct effect of
EC Law within the national sphere, the ECJ, changed this view.
6.2 Principle of Supremacy
In Van Gend en Loos123
, the ECJ held that, by creating the Treaty, Member
States had limited their sovereign rights within certain fields. In subsequent
cases, the ECJ has confirmed that EC law takes precedence over national
statutes124
and even national Constitutions, which conflict with it125
.
According to this position taken by the ECJ therefore, in the event of a
conflict between EC and national law, EC Law should prevail.
In Walt Wilhelm126
parallel proceedings were being held by the European
Commission and the German Competition Authority, on alleged price fixing
agreements with the risk of a possible outcome of double sanctions. In this
case the ECJ held that both decisions could be taken in parallel but this
should not lead to the distortion of uniform interpretation of Community
Law throughout the Community. It was also held that if national decision
conflicts with that of the Commission, the national Court should take
account of such effect. The Court added that there was no express
prohibition on parallel proceedings, but that such proceedings should not
conflict or prejudice Community Law or its measures.
The supremacy of Community Law on competition between undertakings
over national law is illustrated by the Eco-Swiss Case127
where it was held
that national arbitration legislation was contrary to Community Competition
123
Case 26/62 Algeme Transport-en Expenditure Onderneming Van Gend Loos v
Nederlandse Admimistratie der Belastingen [1963] ECR 1
124
See for example Case 6/64 Costa v Ente Nazionale per l’ Energia Elettrica (ENEL)
[1964] ECR 585
125
Case Internationale Handelsgesellschaft MBHB v Einfur-und Vorrastsstelle fur Getreide
und Futtermittel [ 1970] ECR 1125
126
Case 14/68, Walt Wilthelm v Bunderskartellamt [1969] ECR 1
127
Case C- 126/97 Eco-Swiss China Time Ltd v Bennetton International NV [1999] ECR

40
Law. In this case Community Competition policy was likened to public
policy.
6.3 Principle of Direct Effect of Community
Law
The principle of direct effect of Community Law is a mechanism created by
the ECJ through which natural and legal persons can enforce EC Law in
their national Courts. Articles 81 and 82 of the EC (formerly 85 and 86)
have for a long time been held to be directly effective.128
This means that
undertakings and natural persons can bring actions in their national Courts,
to obtain remedies against other undertakings, which breach these
provisions.
6.4 Practical implication of both concepts
The practical implication of both concepts of direct effect and supremacy is
that any conflict between EC Competition rules and National Competition
rules are resolved in accordance with the position under EC Law.129
Furthermore since case law 130
with respect to both concepts indicates that
remedies and sanctions granted in respect of EC Law must not be less
effective than those granted in respect of national Law, it is expected that
there will be a good deal of overlap in respect to the rights and remedies
granted under both regimes.131
Award of damages by national courts for
breach of Community Law, is therefore possible on the basis of these
analysis.
Elements of the Supremacy of Community Competition law over national
Competition law can also be found under the future Competition regime132
.
According to this new Regulation133
the application of national Competition
Law may not lead to the prohibition of agreements, decisions by association
of undertakings or concerted practices, which may affect trade between the
Member States, but do not restrict Competition within the meaning of article
81(1) of the EC Treaty, or which fulfil the conditions under article 81(3), or
are covered by a Regulation on the application of article 81(3) of the EC
Treaty.134
128
See Case 127/73 BRTV v SABAM [1974] ECR 51
129
SeeColeman and Grenfell at 37
130
See for example Case 158/80 Rewe-Handelsgesellschaft Nord mbh v Haupzollamt Kiel
[1981] ECR 1005
131
Coleman and Grenfell at 37
132
Regulation 1/2003
133
article 3(2)
134
See ibid article 3(3) for exemptions to article 3(2) of the same Regulation

41
The Competition Act 1998, also acknowledges this Supremacy, by imposing
an obligation to follow EC Law, when it provides that when an agreement is
exempt from Community prohibition, it also becomes automatically exempt
from the Chapter 1 prohibition of the Act.135
Section 60 of this same Act also provides for a mechanism to ensure that so
far as possible, questions arising on Competition issues within the UK are
dealt with in a manner that is consistent with the treatment of corresponding
questions arising in Community Competition Law. Such questions could be
on procedure, non-competition issues related to the single market, comfort
letters and preliminary rulings from the ECJ under article 234 of the
Treaty.136
135
Section 10 of the Competition Act 1998
136

43
7 Co-operation between
Community and National
Competition Authorities
7.1 Co-operation under the present regime
Because of the direct effect of article 81(1) and 82 of the EC Treaty, it is
possible for national Courts to themselves decide that agreements are
prohibited and thus void, without it being necessary for the EC Commission
to have first adopted a decision or initiated proceedings.137
This implies that
there is shared competence in the application of article 81(1) and 82 of the
EC Treaty, between the Commission, and the national Courts. This shared
jurisdiction however runs the risk of the Commission and the national courts
reaching conflicting decisions. Such conflicting decisions could be for
example that:
- A national Court may decide that an agreement is not incompatible with
article 85(1) now 81(1) whereas the Commission later takes a decision
prohibiting the agreement, or
- a National Court could decide that an agreement was very unlikely to be
granted an exemption while the Commission later grants one.
In the Delimitis138
case it was held that in the event of the possibility of such
conflicting decisions, the appropriate course to be taken by the national
Court is to stay the proceedings or adopt interim measures pursuant to its
national rules of procedure. In the same case it was also said that in such a
situation, the national Court may request the Commission to inform it of any
procedure which may have been set in motion and of the likelihood of an
official ruling. It may also seek legal or economic information from the
Commission in order to enable it to cope with particular difficulties in the
application of article 85(1) (now 81(1)) and 86 (now 82) of the EC Treaty.
The Commission is bound by the duty of sincere co-operation with national
judicial authorities to assist the latter, subject to respecting the requirements
of confidentiality.139
The possibility of asking the Commission for information is without
prejudice to the national Court’s power, or, as appropriate, duty to make a
reference to the ECJ under article 177 (now234) of the EC Treaty.140
The
137
See Kapteyn and Themaat at 870
138
Case C- 234/89 Delimitis [1991] ECR 1-935 AT 993
139
ibid
140
ibid

44
national Court is obliged to look at both the case law of the Court and the
practice of the Commission.141
In the event of doubt it may if possible and
in accordance with national rules of procedure, obtain additional
information from the Commission or allow the parties to seek a decision
from the Commission. 142
It is worthwhile to note that the ECJ has been prudent to phrase the national
Court’s part in this aspect of co-operation in the application of Community
Competition Law in terms of “may” and “consistent with national rules of
procedure” rather than in terms of an obligation as such.143
As a result of the Delimitis decision144
, the Commission published a Notice
on Co-operation145
between national Courts and the Commission in
applying articles 85(now 81) and 86 (now 82) of the EC Treaty.
7.2 Co-operation under the future regime
Under the existing regime on Competition Law within the Community, the
national Courts already had the power to implement articles 81(1) and 82 of
the EC Treaty by virtue of the direct effect doctrine. The co-operation
mechanism between the national Courts and the Commission presented in
the preceding section applies also to this doctrine under the present regime.
However the future new Regulation146
at the time when it shall come into
force will extend the powers of the national Courts and Competition
Authorities to include the application of article 81(3) of the EC Treaty. The
mechanism for co-operation under this new Regulation is dealt with by its
chapter IV (articles 11-16).
Article 11 deals with the co-operation between the Commission and the
national Competition Authorities. Exchange of vital documents between the
Commission and the National Competition Authorities is a key element of
this article. The national competition Authorities are obliged to inform the
Commission by writing without delay after commencing proceedings under
article 81 and 82 of the EC Treaty.147
No later than 30 days before adopting
a decision with respect to alleged infringement of articles 81 or 82 of the EC
Treaty, the competition Authorities of the Member States must inform the
Commission.148
141
Case C-319/93 etc Dijkstra et al. V Friestand (Frico Domo) Coöperatie BA et al [1995]
ECR 1-4471 at 4510
142
ibid
143
Kapteyn and Themaat at 871
144
Case C-234/89
145
OJ 1993 C 39/6
146
Regulation 1/2003
147
ibid article 11(3)
148
ibid article 11(4)

45
According to article 11(6) of this new Regulation commencement of
proceedings by the Commission with respect to alleged infringements of
article 81 or 82 of the EC Treaty, shall relieve Competition Authorities of
the Member States of their competence to apply articles 81 and 82 of the EC
Treaty. If the Competition authority of a Member State is already acting on
a case, the Commission shall only initiate proceedings after consulting with
that national Competition Authority.149
Under this new Regulation, co-operation between the Commission and
national Courts, falls under article 15. In proceedings for the application of
articles 81 and 82 of the EC Treaty, the Courts of the Member States may
ask for information or opinion from the Commission concerning
Community Competition rules.150
A copy of the written judgements from
the national Courts in this connection has to be forwarded to the
Commission without delay.151
Under this new Regulation, it is also possible for Competition Authorities of
other Member States and the Commission, to submit oral and written
observations to the national Court.152
The provision requiring the uniform application of Community Competition
Law under this new Regulation seems to be an implied recognition of the
decision in Delimitis153
. This new Regulation provides that it should be
ensured that the national Court decision does not run counter to a decision
adopted by the Commission initiated to that effect and that national Courts
must also avoid giving decisions which conflict with a decision
contemplated by the Commission in proceedings it has initiated.154
It goes
further to provide that in such a situation the national Court may assess
whether it is necessary to stay its proceedings.155
This obligation is without
prejudice to the rights and the obligations of the national Court under article
234 of the EC Treaty.
149
ibid
150
ibid article15(1)
151
ibid
152
ibid article 15(3)
153
Case 234/89
154
Regulation 1/2003 article 16(1)
155
ibid

46
8 Impact of EC Competition
Law on National Competition
Law
8.1 Introduction
As already mentioned in the previous chapter, the relation of EC
Competition Law and National Competition Law is governed by the twin
concepts of supremacy and direct effect, which must be applied within
Member States irrespective of their local laws. With this in mind, the
relationship between the Chapter 1 and Chapter 2 Prohibitions of the 1998
Competition Act and articles 81 and 82 of the EC Treaty are going to be
analysed in this chapter. This not withstanding, it is in fact possible to
identify a number of different situations where the obligation to follow EC
law may not arise.
8.2 Chapter 1 Prohibition and article 81 EC
Treaty
Save with respect to the territory, in respect of which the anti-competitive
effects are to apply, there is no explicit distinction between the Chapter 1
Prohibition and the Equivalent EC Prohibition under article 81 of the EC
Treaty. It is possible to have a situation where an agreement may be subject
to both EC and UK prohibitions, where for example it affects trade and
competition within the UK and at the same time affects trade between the
EC member States.
According to the Guidelines on the Chapter 1 Prohibition: 156
“article 85 (now 81)157
applies to agreements which ‘ may affect trade
between Member States’. The case law of the European Court has
interpreted this phrase broadly: ‘ the agreement in question may have an
influence, direct or indirect, actual or potential, on the pattern of trade
between Member States,158
and have found that even when the parties to
the agreement are confined to the same country, inter-state trade may still
be affected159
. The term ‘trade’ has itself been interpreted broadly and
covers the right of establishment and the free movement of suppliers as
156
Guidelines on the Chapter 1 prohibition of the 1998 Competition Act, published by by
the Office of Fair Trading, hereinafter Guidelines at paragraph 7.2
157
Emphasis added by author
158
Case 56/65
159
Case 8/72 Vereeniging van Cementhandearen v Commission [1972] ECR 977 CMLR 7

47
well as the movement of goods and services.160
Given the breadth of this
interpretation, many agreements will be caught by both articles 85 (now
81) and the Chapter 1 Prohibition where trade with the United Kingdom
may be affected.”
This burden caused by the overlapping jurisdictions is however reduced in
practice due to the fact that the Chapter 1 prohibition is worded in a similar
manner to the article 81 prohibition. Other provisions in the Competition
Act also act as a safeguarding mechanism to such an eventuality. Automatic
UK exemptions of agreements benefiting from EC exemption (parallel
exemptions) 161
and immunity from the UK penalties for notification validly
made; irrespective of whether it was made to the to the UK or EC
authorities, 162
are some of the examples of the this mechanism.
Article 60 of the Competition Act further ensures that inconsistencies are
avoided. It provides that when the UK courts act on competition issues, it
should ensure that the principles applied and the decisions reached by this
Court on Competition issues, are consistent with the principles laid down by
the EC Treaty and the European Court, and any relevant decision of that
Court at that time, in determining any corresponding question arising in
Community Law, as well as have regard to any relevant decision or
statement of the Commission.
It should be noted that article 1 of the new Regulation163
empowers the
national Courts to apply article 81 and 82 of the EC Treaty, when applying
national Competition Law, where there is the possibility of either articles 81
or 82 being infringed.
8.2.1 Notification of possible overlapping Chapter 1 and
article 81 prohibitions
Faced with the possibility of making notifications for exemption to an
agreement which may overlap between the Chapter 1 prohibition and article
81, either to the Commission or OFT or to both, it becomes necessary to
explore and find out the most appropriate approach that should be taken by a
prudent undertaking.
According to the Guidelines164
at paragraph 7.4, there are several
advantages in notifying agreements under article 85(1) (now81(1)) to the
160
Case 161%84 Pronuptia de Paris GmbH v Pronuptia de Paris Irmgard Schillgalis, [1986]
ECR 353, [1986] 1CMLR 414
161
Section 10 1998 Competition Act
162
See third of paragraph 7.4 of the Guidelines to the Chapter 1 prohobition of the
Competition Act published by the Office of Fair Trading.
163
Regulation 1/2003
164
Guidelines to the Chapter 1 prohobition of the Competition Act published by the Office
of Fair Trading.

48
European Commission rather than to the Director under the Chapter 1
prohibition. The reasons cited for this reasoning are as follows:
- Only the European Commission can give an exemption from article
85(1) (now 81(1)), which will automatically exempt the agreement from
the Chapter 1 prohibition, whereas exemption from the Chapter1
prohibition does not preclude the application of article 85(1)(now
81(1));
- The exemption from the Commission by virtue of article 85(3) (now
81(3)), has effect in all EC Member States but exemption by the Director
has effect only in the UK; and
- provisional immunity from financial penalties under the Chapter 1
prohibition is available without notification to the Director who may not
impose a penalty under the Chapter 1 prohibition if the EC Commission has
not acted on a notification of the agreement made to it.
This same Guidelines165
advise an undertaking involved with such a
notification to notify the EC Commission as early as possible, because it
does not have the power to grant retro-active exemptions in all cases. This
power to grant such retroactive exemptions in all cases, is however available
to the Director.
Where the inter-state criteria is not met but the agreement however does
have an appreciable effect on Competition within the UK, according to this
Guideline the Director will be the appropriate authority to be notified.166
In
the event that the mission considers that that such an agreement does not
affect trade between the Member States the Director will endeavour to give
priority to such cases.167
With the coming into force of Regulation 1/2003, by May 1 2004, this
notification procedure to the Commission in the present regime will become
irrelevant. It may seem that in the future, undertakings will have to rely on
their prudence in order to appreciate whether or not such agreements fall
under the prohibitions in article 81(1) of the EC Treaty or not, and if they do
so fall whether they could benefit from the exemptions under article 81(3) or
not.
Article 3 of this new Regulation empowers the national Courts and the
Competition Authorities of the Member States to apply article 81 as well as
82 of the EC Treaty, but is silent on the aspect of notification. There is no
obligation either on national Competition Laws to include notification
procedures to national Competition Authorities. However since the UK
165
Guidelines to the Chapter 1 prohobition of the Competition Act 1998 published by the
Office of Fair Trading.
166
Paragraph 7.6
167
ibid paragraph 7.7

49
Competition Law still provides for notification, it would seem that
notification on agreements and practices under articles 81 and 82 of the EC
Treaty will still be made to the Director. In such a situation instead of
following the notification procedure under the Competition Act, the Director
will be obliged to follow the procedure provided for under article 5 of this
new Regulation in conformity with the Co-operation procedure under
articles 11 to 14 of the same Regulation.
The practical implication if the UK procedure will still be providing for
notification by the time this new Regulation will come into force, would
seem to be that the desire to have similar texts between the UK and EC
Competition Laws would be distorted thereby allowing for an undertaking
to deal with conflicting procedures on issues which could likely overlap.
However it is the opinion of this author that it is not necessary for the UK
legislator to repeal the notification procedure under the Competition Act, so
that it is modified in a like manner to the new EC Regulation. The reason
being that the paramount reason for this change at the Community level was
to reduce the workload of the Commission by allowing for decentralisation
of Community Competition Law. This seems not to be the problem for UK
and other national Competition Authorities. However it will be necessary to
accommodate the Act to the new powers procedures provided for by this
new regulation, especially with respect to the power to grant exemptions
under article 81(3) of the Treaty provided for by this new Regulation.
8.3 UK Chapter 2 prohibition and article 82 EC
The Chapter 2 prohibition of the 1998 Competition Act defined under
section 18 is identical in many respects to article 82 of the EC Treaty. In
order to comply therefore with the requirement of consistency with EC Law
under section 60 of this Act, it is necessary that guidance on the
interpretation of the key concepts of dominance and abuse can be obtained
from a review of the decisions and practices of the ECJ and the European
Commission. This not withstanding, they still remain a number of
differences between both provisions.168
These differences could be
summarised as follows.
- While article 82 of the EC Treaty deals with the Common Market, the
Chapter 2 prohibition deals with the abuse of dominant position within
the UK. In this connection the UK government has made it clear that
there must be a dominance in a relevant market and that although this
market must include the UK, it is not necessary that the market be
entirely contained within the UK.169
- Under article 82 EC, the abuse must affect trade between the Member
States, while under the Chapter 2 prohibition of the Act, the abuse should
rather affect trade within the UK or any part of it. The territorial scope of
168
169
See ibid at 210

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